Vinik's Hedge Fund Leaps In And Out Of Stocks
September 28 2009 - 2:53PM
Dow Jones News
Over the past year, Jeffrey Vinik has been doing what he's
always wanted to do: time the market without having to answer to a
bureaucracy.
The former Fidelity Magellan fund skipper, now head of Vinik
Asset Management, had $6.8 billion in equity investments at the end
of the second quarter, according to SEC filings. That sum is up
from only $422 million in equities at the end of 2008. But at the
end of the second quarter in 2008, his hedge fund had $11.8 billion
invested in stocks.
Vinik returned most of the money in his hedge fund to his 160
investors in 2000. Now he manages money for wealthy friends, family
members and a few long-time investors he has allowed to stay in his
fund.
A person familiar with Vinik said he's not timing the market per
se - that he is still the fundamental, bottom-up research oriented
manager he has always been. He just happens to have gotten very
bearish in the second half of 2008, like a lot of other hedge fund
managers.
But Vinik did display flourishes suggesting market timing even
on his watch at Fidelity Magellan, which he ran from 1992 to 1996.
He shifted more than 35% of the stock fund's portfolio into bonds
and cash in the mid-1990s, prompting criticism when the market drop
he feared didn't materialize immediately. Eventually, it did.
Don Phillips, a managing director at Morningstar, said the stock
picking is indicative of how Vinik learned to invest, in the mold
of famed Magellan manager Peter Lynch. "Vinik," Phillips said, "was
the golden child." He felt less comfortable when Fidelity, in the
1990s, reined in money managers' independence.
Vinik left Fidelity and set up his own shop, which had immediate
success betting on technology stocks and adept timing in getting
out of them before the Internet bubble burst.
The flexibility of running money for a select few - rather than
for investors in one of the most scrutinized mutual funds in the
world - allows Vinik to add and subtract from his equity positions
from quarter to quarter without having to defend his decisions.
Lately, he has taken advantage of that flexibility.
Going from $11.8 billion to $422 million is "definitely
extreme," said Sam Norvell, senior vice president of Hennessee
Group, an adviser to hedge fund investors. While not talking about
Vinik personally, Norvell pointed out that many hedge-fund managers
turned bearish at that time because of fears about financial
institutions and something even more unpredictable, government
intervention.
But just as quickly as it turned into a bear, Vinik became a
bull during the first half of this year. The firm took more than
200 new positions during the first half, and its top holdings
include an exchange-traded fund that invests in gold, Green
Mountain Coffee Roasters Co. (GMCR) and an old favorite for Vinik,
Google Inc. (GOOG). Vinik sold out of a long-standing Google
position at the end of 2008, only to buy back in this year.
Vinik doesn't take positions of more than 5% in most of its
holdings, according to filings. Many of those holdings are
large-cap stocks that can be hard for a single investor to move
when buying or selling.
Vinik's moves into and out of the market seem timely, but it
couldn't be determined what the fund's return has been. The firm is
so secretive that it doesn't even use corporate email. Jeffrey
Vinik did briefly fall into the spotlight in 2007 as a limited
partner of the Boston Red Sox, when his son Danny caught a foul
ball over the glove of an Anaheim Angels outfielder's glove,
prolonging an at-bat that led to the Red Sox tying, and eventually
winning, a playoff game.
The SEC filings don't say how Vinik reduced its exposure to
stocks. The firm could have moved money into credit instruments,
lowered leverage in its funds, paid investors their money, or a
combination of those things. Jeffrey Vinik wouldn't comment for
this article.
-By Joseph Checkler, Dow Jones Newswires; 212-416-2152;
joseph.checkler@dowjones.com